Few tech entrepreneurs have created a billion-dollar company. Kevin Ryan, has created not one but multiple billion-dollar companies. Ryan co-founded DoubleClick, which went public and then sold to Google for $3.1 billion; MongoDB, recently did an IPO with another billion dollar valuation; Gilt Groupe, sold for $250M and Business Insider recently got acquired for $450M.
In a new episode of the DealMakers podcast Kevin Ryan shares the formula to create multiple billion dollar companies and the different factors to take into consideration.
In this episode you will learn:
- What it takes to build a billion dollar business
- What to look for when creating the founding team
- How the NYC landscape has changed with startups
- When to raise and when not to raise for your company
- How to weather the storm when there are potential market corrections ahead
- The process of taking a company public
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
ACCESS THE PITCH DECK TEMPLATE
About Kevin Ryan:
Kevin P. Ryan is the co-founder and Chairman of AlleyCorp. He is also one of the leading Internet entrepreneurs in New York. He has founded and is Chairman of several businesses, including MongoDB, Zola, Workframe, and Nomad Health. Previously he founded and was chairman of Business Insider and GILT Groupe.
Combined, these companies have raised more than $700 million in venture capital funding and currently employ almost 2,500 people.
Previously, he helped build DoubleClick from 1996 to 2005, first as president and later as CEO. He led DoubleClick’s growth from a twenty-person startup to a publicly traded global leader with over 1,500 employees.
In 2013 Kevin was named one of the 100 Most Influential New Yorkers of the Past 25 Years by the Observer. Aside from his professional responsibilities, Kevin Ryan serves on the board of Human Rights Watch and is Vice Chairman of The Partnership for New York City, Chairman of the Partnership for New York City’s Innovation Council, and a member of the Council on Foreign Relations. He is also a director for the Trust for Governors Island and is on the board of TECH:NYC. He previously served on the boards of INSEAD, the Direct Marketing Association, The Ad Council, HotJobs, and the advisory board of Doctors Without Borders.
Kevin received a B.A. from Yale University and an M.B.A. from INSEAD.
Connect with Kevin Ryan:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Intro music playing….
Female: Welcome back to the DealMakers Podcast Show with serial entrepreneur, Alejandro Cremades, bestselling aunnnnnnnthor of The Art of Startup Fundraising and cofounder at Panthera Advisors. In this podcast, we ask our guest about their successful acquisitions and financing rounds.
Alejandro: Alrightee. Well, hello, everyone and welcome to the DealMakers Show. So today, we have someone that has done a lot for the ecosystem, for the entrepreneurial ecosystem and more particularly for the ecosystem here in New York City, has founded multiple companies, exited many of them and I can’t wait to really hear more about it. So Kevin, welcome to the DealMakers Show.
Kevin Ryan: Thank you. Happy to be here.
Alejandro: So I guess how many companies have you built and exited by now?
Kevin Ryan: Well, I’ve started a lot of different companies, most of them are still going. The ones I have exited are Business Insider, sold about three years ago to Axel Springer. Gilt Groupe which I sold also about three years ago to Saks, to HBC. And then for nine years, I was the presidency of DoubleClick and then we exited that as well. The other companies I’ve started which are five or six others are still going and some are public. I mean I don’t consider Mongo an exit although it’s actually public so technically it’s liquid but you know we’re still part of it and I’m still the chairman and we’re still building it and I think it will be independent for a long time, and the others are private.
Alejandro: So I guess DoubleClick is the company and by the way that’s really amazing and I’m sure that the learnings that you’ve gotten from those is remarkable and we’ll get in to that in a little bit. But you started at DoubleClick and you know as you were pointing to and from my understanding that’s your first significant exit, right? So you joined the team when there were 20 employees. So could you talk to us a little bit more about this experience?
Kevin Ryan: Yes. It was an extraordinary experience. I mean when I joined there was 15 to 20 people. It was very early. I spent several months as the CFO then I became president where I managed really most of the company for four years, then I became the CEO for the next five years, and then we sold the company. And what was extraordinary about it is that four years after I started, we had 2000 employees in 25 countries, so just an incredibly intense expansion and that expansion resulted in DoubleClick to this day being the dominant ad technology company. Two years after the company started, 18 months after I got there, we took the company public so in the middle of all these and it was worth $12 billion you know four years after we started. So a remarkable four-year period and then the internet collapsed. We spent two and a half years, I was CEO doing round after round of layoff. We lost 70% of our clients which I don’t recommend. The stock price went from $130 to $5 a share, so very, very tough time. But it wiped out all of our competitors. We actually gained tremendous market share during that downturn and then the result that came out of it with about 30% profit margins, 60% of the world’s ad serving market and a truly dominant position.
Alejandro: Got it. So I mean you were pointing to the tremendous growth in four years, so what was the shareholding team and also the initial team members, what does that look like and how did that change over time?
Kevin Ryan: Yeah, we, so two founders, Kevin O’Connor and Dwight Merriman, and then me and then you know we built up a team, a very, very good team including David Rosenblatt who now runs First Dibs, Linda Mallard who now runs a large media marketing agency, you know, a number of fantastic people. CFO, I hired Jeff Epstein became the CFO 10 years later of Oracle. Our head of HR, Brian Skipper, became the head of HR 10 years later at CISCO. So we had people who even though they joined the company of a hundred people could scale and were truly very good executives and that’s what made the difference; otherwise, you can’t grow like that.
Alejandro: Got it. Got it. I mean without a doubt the taking the company public has or the perception you know has changed a bit. So I guess like from your perspective like on the operator’s side, how did you manage that transition from leading a private company to leading a public entity?
Kevin Ryan: You know, it depends on the phase so that on the bubble phase in the late 90’s, all of us were growing like crazy and so generally beating our numbers. Everything was great. Everyone started feeling better. So being public felt like a wonderful gift. When your stock price drops and everyone abandons your shares, it feels less exciting. So it really just depends in what period of time you’re at. Mongo went public 11 months ago and we’ve had a very nice steady run when it went public at $24 a share. It’s probably $65 a share or so today. Numbers have been good. It sort of depends on how you’re doing, how predictable your numbers and the environment you’re in as well. And sometimes, you’re happy to be public and sometimes, you’re not happy.
Alejandro: Yeah. Yeah. That’s makes total sense. So I guess DoubleClick was ultimately acquired by Google. Is that right?
Kevin Ryan: Yeah. For a little over $3 billion in 2007-2008.
Alejandro: Got it. And how did the acquisition come about?
Kevin Ryan: So DoubleClick first of all was public until 2005 and then a private equity firm, Helman and Friedman bought the company. And then two and a half years later, the market kept getting better and better and so they ran an auction between Microsoft, Yahoo and Google, and Google paid the most. So it’s a big sale and I think a very strategic sale for Google and I think they’re still happy today to own that company.
Alejandro: Got it. Got it. Got it. So I guess after the acquisition of DoubleClick, you go on to launch AlleyCorp.
Kevin Ryan: Yeah.
Alejandro: And at this time, the concept of venture builder was almost nonexistent and we’re talking about 2007. So how did this idea come about?
Kevin Ryan: You know it really, it wasn’t necessarily a strategy. What happened was I was working with Dwight Merriman who had been one of the cofounders and the CTO of DoubleClick. And we had an idea for a company and so we’d start it. And we’d realized that in the very beginning sometimes we felt we had extra time depending on what role we played so we can start another company. Oh we had more than one idea, so we said, “Why don’t we do that?” When we started Mongo, I didn’t have that much to do because for a year and a half it was really development project. It was only engineers building a database. And so I could start Gilt and I could start Business Insider and in Business Insider’s case, it had to have a CEO right away. I wasn’t the right CEO so got on Henry Blodget who was amazing. So all of a sudden I realized I have three companies and Dwight would play a role, I would play a role. I was chairman of all of them and founder and realized that we could a lot of value to the CEOs we brought on board, and so really just continue that ever since. I took a break for three years because I stepped in to be CEO of Gilt when it was going through a crazy growth phase. I felt like I was the right person to step in but since then I’ve been starting more companies and you know have started Zola and WorkFrame and Nomad and more on the way. So it’s been a remarkable time in the last 10, 15 years to start companies. So I’ve been very happy with it.
Alejandro: That’s fantastic. I mean as part of AlleyCorp you cofounded and as you were pointing to become the chairman of companies like Business Insder, Gilt Groupe, Nomad Health, WorkFrame, Zola.com, MongoDB, so obviously all of them massive success stories and companies that have raised hundreds of millions. So these companies like in the process of really coming up with these initiatives, right?
Kevin Ryan: Yeah.
Alejandro: So what does that look like and is there a specific framework that you typically follow to understand? What options may make the most amount of sense to pursue?
Kevin Ryan: You know in some ways there’s not really a specific framework because the things I do are so radically different, you know. Obviously you can’t have companies more different than MongoDB, Business Insider, Gilt and DoubleClick. They’re four different corners of the internet. So I’m just always thinking. I’m passing my life thinking about where are the problems. And sometimes there are problems in front of you that the average person doesn’t recognize where something takes too long, it’s too inconvenient, it’s too expensive. I mean if we were sitting here in 2007 and I said, “How do you feel about your database choices?” You would have said, “Oh my god, you know, they’re so expensive.” The software costs have come down but the Oracle database is still really expensive. And so we just had to think you know did it have to be that expensive? Can we do something better, faster, cheaper? And the answer was yes. If you are reading you know the Wall Street Journal at that time, they hardly updated their site during the day. And so I remember thinking that doesn’t make sense. That’s a problem. I want to know what’s going on during the day, and so the business data was faster. And we forget now but even in 2007 there wasn’t really a place you could buy you know discount merchandise, good quality discount clothing online. That just didn’t really exist, and so that was Gilt. And so each sector is different. I’m always thinking about it and thinking is there a big opportunity where I have a clear vision of a product that is going to be different from what’s out there. But that’s a judgment call. And you still got to build it and make it happen.
Alejandro: Absolutely. So I guess now like taking a look at the landscape, are there like particular sectors that you think like have a [09:49] potential that you’re following closely at this point?
Kevin Ryan: Yeah, I mean I think the one thing is that I am more bottoms up so I see an opportunity and it could be in a good sector, it could be in a bad sector but I’m looking at that opportunity. Because there are some big areas like education which I think is a big opportunity but I haven’t had the right idea, and there are some areas like wedding registries which is Zola. Ecommerce is not necessarily an area where it’s easy to make money but I had a very, very good idea there that has worked extraordinarily well. It just wouldn’t have worked for other verticals. So in general financial services, healthcare and education are still three of the biggest areas where there are startups but there’s still many, many large companies with bad products and there’ll be opportunities for people. So those are three good sectors.
Alejandro: Got it. So I mean typically idea they take time to incubate. So how do they incubate within the AlleyCorp ecosystem?
Kevin Ryan: So in a way, there’s not a lot, I don’t have a long incubation period. So if I have an idea, I would generally decide within the next 30 days you know maximum 60 days whether I’m going do it or not. And so if I decide I’m going to do it, I never put together financial model even though I’m a former CFO. I really have to just understand the consumer whether that’s a B2B or a consumer-consumer. I just have to understand what’s going through that person’s mind, what are the challenges, what are the problems. So it really involves a lot of interviews of people. Like before starting Zola, talking to lots of brides and understanding what went well for them when they got married, what didn’t go well and understanding the pain points. And so that’s what I want to figure out is where is the problem and do I have a clear idea of how I’m going to solve it and sometimes it’s hard to solve. And so you’d think I don’t know if I can do that. And sometimes you think you know I can totally build that. And then once I make the decision it’s hiring the team.
Alejandro: Got it. So right before making the decision, is there one specific question that you always ask yourself?
Kevin Ryan: No, just three things. It has to be a big market so it’s interesting enough for me, to feel like there is a billion-dollar opportunity here. You’re not always going to get there but you know, if it works, it’s that big. And two, do I have a clear visions of product that can be built; and then three, is there a constraint? Is there some reason I can’t build this? And if it passes those three, I’m ready to go. Although I should say I have to be intellectually interested in it because I may be involved with this for 10 years and so for example, I’m bored of ad tech now. It’s not that it’s a bad sector. I just didn’t want to do anything there, I did it already. So no matter how good your ideas, I would never do anything in ad tech right now.
Alejandro: Got it. Makes sense. So I guess once you decide, let’s say you know you make the decision, you’re going to go forward with something, with an initiative. You build the team, you fund the seat state cycle of the business. How do you determine what is the right data to track in order to understand the health and the progress of the business over time?
Kevin Ryan: Oh you know, the judgment is so much on the business. You’re really trying to see do consumers like it. Really, are they coming back? You know, if they’re B2B, are they happy? Are your first five customers very happy? And if it’s consumers, you should see traffic growing without marketing. And if it doesn’t happen, then I’ve launched many products as part of companies that haven’t worked and you can see that after four months it’s just not growing. They don’t really love it. You thought it was a good idea but it’s not. They don’t think it’s that great and that happens.
Alejandro: So really quickly on that, Kevin, talking about not spending on marketing, are there like specific distribution channels that you think are like the most effective ones at the beginning that are like more organic?
Kevin Ryan: Yeah, I mean you’re going to start by sending it out there with everyone you know, that makes sense. You’re going to do a little bit of PR. You know, I might buy some keywords just to drive a little bit of traffic there but you know on the consumer side if 10,000 people have been to your site which is actually tiny in the scheme of life, that’s plenty for them to either decide to come back, to tell their friends. You know, it should be growing even from there. Business Insider never spent $1 in marketing in the history of the company and now it’s probably getting close to 200 million uniques…
Kevin Ryan: … just because people liked it and they came back. And so Gilt by the way when it got to $100 million in revenue with very, very little market.
Alejandro: Got it. So I guess Kevin, is there like a specific timeline within the AlleyCorp universe that it takes for a company to kind of like gain its own shape until you guys let that company fly on its own?
Kevin Ryan: Well, look, in some ways it’s on its own in the beginning. It’s an independent company. It’s not really part of AlleyCorp. I’ve funded it. Let’s say there’s a CEO in place. Let’s say we launch with an eight person team which is probably the average. Then it’s now an independent company. I happen to have a big shareholding but it’s on its own. The CEO is in charge of the company. I’m the chairman and we’re often running. And so it doesn’t sit within AlleyCorp. Each company has to feel like they own their own destiny because there’s nothing they can really—business doesn’t learn MongoDB that much. They’re totally different businesses. So Henry never spent any time with the MongoDB people.
Alejandro: Got it.
Kevin Ryan: He spent time with me but not with them. They’re separate.
Alejandro: Okay. So I guess to that aspect, after building so many successful startup teams, what are typically the patterns that you see on those that you would like or you would typically recruit at a let’s say cofounder level or management level to these teams?
Kevin Ryan: There are many different profiles that can work you know. The profile for the Mongo CEO in the beginning had to be deeply technical without being very marketing oriented. In general, I’d like the CEO to have the skill base that I think is the most important for that company. So Business Insider had to be a great journalist/writer. For Mongo, it had to be a technical person. For Zola, it had to be a product person. So that’s what I really like as the CEO because you don’t have any skill but you might as well have the core skill. Later on, when you get to be much bigger now Mongo can have someone who has to be somewhat technical but not a technical genius because sales and marketing become more important for an enterprise software sales company 10 years in than the initial technology, so that can evolve over time. But you know there are CEOs who are introverts. There are CEOs who are extroverts. But one of the skills that’s the most important is I have to feel like this person can recruit, hire and manage people. The market is so competitive for people that any employee who is any good can work at our company but he has 10 other offers. He’s going to want, or he or she has to want to work for that CEO. And they’re going to do reference calls so the most valuable thing I can hear is that this person worked for XY company before and the team loved working for him or her.
Alejandro: Right. Got it. And I guess you were pointing to the fact that you create those companies and then you eventually put yourself there as the chairman. So how do you really, especially for those that are listening, that are looking at their corporate structure and perhaps creating boards, how do you define a healthy relationship that is chairman and CEO relationship?
Kevin Ryan: Yeah, I feel, and I work with probably 12 different CEOs right now and I feel very good about the relationships. And so the key is always I think no different than a good manager which is you need to spend enough time so that you know what’s going on as chairman. Then between my various companies, I have to figure out where do I add value. Sometimes I don’t add any value because I don’t know as much as the CEO does about some of the specific area and I need to stay out of the way. But sometimes, I think I can add some value and some perspective, and that could be in hiring, that can be in raising money, that can be on some bigger strategic questions. The ideal role is you know the CEO cannot talk to anyone about his or her relationships with his senior team. Who do you talk to? And so he can talk to me and so I need to know them all a little bit so I can say, “Oh, you’re having some issues with Mary who’s the CFO. Let’s talk about that and think about ways to handle it.” I think that’s a very important sounding board for CEOs. And then an important part is raising money. Once a year you’re raising money and that entire process I’ve done a lot of. No CEO would have done it as much as I have and so I can add perspective in relationships there. And the only thing that—and I’ve been on both sides of this, when you’re CEO of the company, you’re just too close to things. You just can’t help it. You’re spending 60 hours a week. You believe in it and I can be just slightly more removed and that can be a strength. And when I was a CEO, I found the same thing happened to me. I got too close to it and my very good board members sometimes would remind me of something I wasn’t seeing, just too close.
Alejandro: Got it. Got it. So let’s say take a little bit deeper on the fundraising that you were mentioning, so you’ve raised for your companies over 700 million at this point. Is that right?
Kevin Ryan: Yes.
Alejandro: So how do you typically approach the fundraising process, Kevin?
Kevin Ryan: So there are a couple of things that I think are important. One is let’s say N minus 6. N is when you’re going to run out of money. So you’re six months ahead of time. You want to be having a light deck ready and you want to be meeting with some VCs telling them you’re not raising money. These are dryruns. You’re just giving them an update on the company. You’re feeling them out. You’re either going to sense whether they’re very excited or just really not that excited and you start to hear all the questions and then you know, “I really didn’t answer that very well. So I need to work on that.” So then by the time you’re N minus 4, you want to go out and if you need to talk to strategic players, you need to give them more time so you definitely want to have those conversations. And if you’re ever thinking of the company, selling the company, you need to have those conversations then. Then at N minus 3, I’m really going out and I’m going to hit the ground running. The CEO is going to have a weekend meeting to San Francisco and a week in New York, probably a total of maybe 12 companies. Hopefully some of them we’ve already met within the past, sometimes not, and we’re going to go out as many as possible. You’re starting to process and you want to have term sheets about six weeks later. So two weeks of meetings then you’ll see sometimes all 12 want to keep going, sometimes only three want to keep going. I think another important thing is to go out there and let’s say you and I really want to raise 8 to 10 million. I go out and say that we’re going to raise 6 to 8. I want to keep everyone at the table. I don’t want people to walk away because they think it’s too expensive. It’s just like an auction. An auctioneer always starts with the lower price than where it needs to end up. Because once you start bidding, you want to win.
Kevin Ryan: And so I want to bring you in and the best thing that can happen is I go back to you and I say, “You know what, I know I said 6 to 8, but now I’ve gotten feedback from everyone, it’s really going to be 8 to 10.” What does that tell you, the VC? This is a hot deal. There is interest. There is demand. You want it more now than you want it before, not less.
Alejandro: Got it. And typically for your companies, Kevin, are we talking about like when you start really the fundraising process and they’re out there, you know, like at this point where you want to bring out, try investors like does it start as series A, series B?
Kevin Ryan: I mean it’s hard to know what to call these things now but generally when I’ve spent 500,000 to 750,000 and we have a team and we have a product, when I go out to raise money, we’re going to raise 3-5 million at somewhere between 10-20 million pre.
Alejandro: Go it. Got it. So I’m guessing you’re, in the case of these companies, what are the I would say what are the questions that you perhaps ask yourself or the management teams that lead you to believe that is the right time to actually go out to raise money?
Kevin Ryan: Yeah and by the way we’ve been thinking about that from the first day and so what I’m thinking is what are the proof points that we are going to have, that we are going to de-risk it for this investor? So one of them is team. So you’d like to have as many of your senior team that makes sense in place. Secondly, you hopefully have a product at that point. Maybe you have a couple of customers. You don’t have to have a lot of them but I want to be able to go to you and say, “Look, you don’t have to worry. This is what the product is going to be like. Customers like it. You can talk to them. The team is in place.” Now we’re just going to debate how big a market this is. You know, am I going to end up with a hundred customers or a thousand customers. We can have that conversation but it works. The value goes up a lot once—you know I launched Gilt, when we raised money for Gilt, right, as we were launching you can see, you can see the team, you knew how it was going to work, you know we can get inventory. We’ve answered all those questions.
Alejandro: Got it. Got it. And you know I guess your case is obviously different than you know perhaps those that are first timers and they don’t have perhaps the track record but I think that you’re at a point that is very interesting, right, because you get to actually select the investors, right.
Kevin Ryan: Yes. Yes.
Alejandro: It’s like everyone probably when they hear that Kevin Ryan is raising for a new company, they’re probably fighting to get on your table. So what are the qualities that you really consider the most when determining whether or not you want those people to see your table?
Kevin Ryan: Yeah and by the way don’t forget, I’ve done probably 40 or 50 rounds and they’re rounds where you come from a position of strength and then there are rounds where you come from a position of weakness that your numbers aren’t as good as you thought. So I’ve had all types of rounds. I’ve had rounds over practically begging for money and then I’ve had rounds where everyone wants to do it. So look, when you are selecting, you want someone who’s excited about the idea. You want someone who you think you’re going to like. I think it’s—I don’t want the very experienced kind of asshole VC who’s going to try to run the company.
Kevin Ryan: I don’t want that because at the end of the day, the management is going to run the company. I’m going to spend much more time than this VC on it. We want a smart person. We need their money and we want someone who understands and believes in what we were doing. And so in general, I have a lot of VCs involved right now and I’m actually happy you know with just about every VC I’m involved with. There are a lot of perfectly good VCs and I like my relationship with them.
Alejandro: That’s fantastic. I mean you’ve had a lot of experience, Kevin, and really when it comes to hyper growth, you are an absolute expert. And you’ve seen the downturns as well on the market. We’re talking about that earlier. But I guess that you know there’s a lot of people talking about being in the biggest bull market in history, how are you seeing perhaps like preparing as a hyper growth company towards a potential downturn where capital is more expensive?
Kevin Ryan: Yeah, I mean look first of all there’s a big difference between 1999 and today. I’ll say this definitively, there is no bubble today at all. Absolutely not. Now, could the market be overvalued by 25%? Absolutely. Will the market overall pull back at some point? Absolutely. But the definition of a bubble is not the same thing as being slightly overvalued. The definition of a bubble which happened with Tulips and happened with internet stocks is when the entire sector, the value of the entire sector goes down by 80%. The word bubble is a dramatic thing and there is zero chance that that is going to happen here. But yeah, I think capital will be tougher to get at some point, no question. Markets will get tougher. But there’s a lot of fundamental value being created here so I’m actually not preparing for that at all. You know you need to raise money when you need to raise money and it’s the right time. You don’t have the much flexibility over it. If you and I do an A round today, we have money for maybe 14, 15 months. You know, we can start raising money maybe 9 months from now. Worst case, 12 months from now. That’s our margin of flexibility. You’re not going to go raise money three months after you just raised money. So I think it’s good to be cautious and have a little bit more money right now because of all these but you also you know you just got to go forward because if you’re going to be super cautious and I’m competing with you, I’ll be more aggressive and you’ll be behind.
Alejandro: Yeah. Yeah. Makes sense. Makes sense. So I guess…
Kevin Ryan: There were people worried about the downturn two years ago and if they’ve batted down the hatches and decided not to grow, they’re much, much smaller than my company.
Alejandro: Yeah. That makes absolute sense, Kevin. And I guess going a little bit more in to the learning experience and I guess more on the exit side or acquisition side, for those companies I mean that are part of or that you’ve created or been part of as AlleyCorp, that you have so far that have exited, Business Insider, I mean a publicly stated is saying 450 million exit.
Kevin Ryan: Yes.
Alejandro: Gilt Groupe $250 million exit.
Kevin Ryan: Yeah.
Alejandro: So what did you learned from these two exit stories?
Kevin Ryan: Oh yeah and they were completely different stories really. You know, Business Insider we had no one intention of selling and I didn’t want to sell the company. We got an offer that was incredibly compelling. It was 11 times revenues at the end and so we felt it’s the right thing to do at that price to sell the company. Gilt, I absolutely wanted to sell. I didn’t feel good about the next couple of years. And I went in to that process willing to sell at whatever price the market came back with because there were some people who said, “Oh, it’s lower than you wanted.” And it was lower than we wanted but I was convinced that if we waited two more years, the price would even be lower. And by the way, you may have seen that Saks resold the company they paid $250 million for recently I think they sold it for $10 million.
Kevin Ryan: They gave it away. Because unfortunately I was right that the dynamics in that industry were going the wrong direction and there was no way to overcome it and so sometimes, look, if you have an oil company and if you happen to know that oil prices are going to drop over the next five years, it doesn’t matter how good you are, you’re better off selling the company now.
Kevin Ryan: And so that’s what I felt.
Alejandro: And I guess when you get to that point where something is telling you that is the right time, right, to actually do the exit, do you have any tips or recommendations for those that are listening in terms of how can you really optimize for price? What does process look like?
Kevin Ryan: Look, all you can do is you know go out there and do a comprehensive sale process relatively quickly. Try and maintain the fact the idea or the image that you have other options. And you know explain to people why if they buy it for $10, it will be worth $20 and it has to rest on the fact that they will add a lot of value. So even when Saks bought Gilt, they felt like they had all these contribution. They had all these relationships with brands so they they’ll be able to do a much better job and you have to encourage that, and not just say, “Oh my god, it works so great. You can never do better.” You say, “Look, we try to do this but you guys have more experience to this area.” So you can’t let your ego get in the way even if you don’t believe it. I didn’t think they’d be successful and they weren’t, but we have to persuade them that they would.
Alejandro: Got it. You know it’s interesting I guess that fundraising to certain degree you have things figure it out or almost things figure it out and on acquisitions you need to completely figure out things because it’s not your idea. It’s the idea of who is acquiring you. Would you think that’s the way to put it?
Kevin Ryan: Yeah. Absolutely. No, they have to feel good about it. It’s hard. By the way, we didn’t have a lot of buyers. We went out to 60 companies and ended up with one or two people who are interested. So it was a close call. So I was very happy but I was very happy to sell it. And then Mongo, you know, we’ve never wanted to sell. I feel the opposite of Gilt at every moment including today. I think the company will be much more valuable five years from now than it will be today. So very happy to be a shareholder for the long term.
Alejandro: That’s great. That’s great. I guess in your career, Kevin, what has been that single event that has given you the greatest learning experience?
Kevin Ryan: You know, look, I think the DoubleClick experience was remarkably formative for me. Partly because at the beginning I was 32 and so I was also managing 2000 people when I was 36 or 37, and so that’s a big, big step forward. And so that just means that you’re making decisions you know 50 times a day and some are right and some are wrong, but that’s how you learn, you know, hiring, firing, acquiring good companies, acquiring companies that didn’t work out, everything. I felt like I have 40 years of experience condensed in to 9 years, and that has helped me in everything going forward since then.
Alejandro: Got it. And you know it’s really remarkable the amount of contribution that you’ve had to shape up the ecosystem here in New York and obviously in the east coast but talking about Silicon Valley, right, which is how people have coined this area, like how have you seen a change over time since you started?
Kevin Ryan: People already forget that in 1996 at the beginning of DoubleClick, there were no startups in New York City. They were close to zero. And so the first hundred people we hired did not come from start ups. There just weren’t any. But we’ve counted 34 people came from DoubleClick and had become CEOs of startup companies in the vast majority of New York. You know, just from Gilt right now, we have seven companies that are worth more than $100 million started by ex-Gilt people. And that has only happened in the last five years. There’ll be more as we go along. So it’s just so fantastic for me and I know in my own companies this is happening and some other companies as well, but I think Gilt and DoubleClick had unusually good people and most VCs even today will tell you that and they’re contributing to the next generation. And the seven Gilt companies already are worth about $2 billion combined and they’ll have you know in a way their children and keep going and that’s what makes for a great ecosystem that Silicon Valley has had for four generations, and New York is still in its first or second generation. I’m arguably first generation since I was here in ’96.
Alejandro: Yeah. Yeah. I mean I’ve seen it as well myself. I remember when I came here a little bit over 10 years ago. I mean we didn’t have this ecosystem of VCs and angels and employees that are ready to jumpship and help you push things forward. I mean it’s really unbelievable how things have come along. I guess in your case, Kevin, looking back now and after all this experience that you’ve been able to acquire I mean during the good times, during the bad times which is where I believe that you really learned, what piece of advice would you give to your younger self about let’s say fundraising or getting your company acquired?
Kevin Ryan: You know, look, let’s not forget that you know 90% of life if you have a great asset, everyone wants to buy it. So you know the process itself is very different when your company is growing 50% a year and it’s making money, it’s all good. So obviously you want to do the best job you can but just focus most of your life on creating a big company that has amazing people, that is growing, that’s doing the right things and then the rest of it will take care of itself. There’ll be ups and downs but in the long run, you sort of get what you deserve even if in the short term there’s some difficult moments that you and I have both seen.
Alejandro: Yeah and just stay out of curiosity like you know obviously especially when you’re starting out the tough times are typically 90% of the time and you know that 10% is really amazing and it carries you through the entire journey. Like how, what kind of advice do you give let’s say the teams that you’re working with or companies that you invest in like how to deal with these tough moments?
Kevin Ryan: I try and remind them that they need to think of it like if you’re an athlete and so let’s say you played some sports in high school. You’re on some good teams. You’re on some bad teams. That happens. And you’re not going to let it fundamentally impact. You may be on a bad soccer team but that doesn’t mean you quit soccer. You just try and get on the better team next year. And so you have to think of your career in the same way. You’re going to be on 10 different teams and you played the best you can but don’t let it impact how you feel about the game. And the game is tremendous, meaning the startup game is so fun, you know, out of 20 people you and I know who have gone to join startup companies from large Procter & Gamble type companies, none of them go back. You don’t say, “Oh yeah, I want to go back there because it’s really safer and better.” They don’t, because they have more responsibility. It’s dynamic. Everything matters. It is just the right place for all of us to be today.
Alejandro: Right. Right. Makes absolute sense. Kevin, I know that you’ve been very, very generous with your time and I have a tremendous amount of respect for you. I did learn a lot during this time on the show and I’m sure the people that are listening are able to as well to get a tremendous amount of value. So I guess that for this people that are listening, what is the best way for them to reach out and say hi.
Kevin Ryan: You know easiest one is on LinkedIn but if not, just send me an email, Kevin@alleycorp.
Alejandro: Fantastic. Well, Kevin, thank you so much for being on the show.
Kevin Ryan: Alright. Thanks. Happy to do it.
Female: You’ve reached the end of another episode of the DealMakers Podcast. For free resources and materials, head over to alejandrocremades.com. Thank you for listening and see you at the next episode.